Fixing California: San Jose Mayor Chuck Reed

San Jose Mayor Chuck Reed, a Democrat, put his substantial political capital on the line last year in seeking voter approval of an initiative to curb the rapidly escalating pension costs that were crippling his city’s ability to provide municipal services. The initiative, Measure B, was approved by nearly 70 percent of voters. He was interviewed in his San Jose office by U-T Editorial/Opinion Director William Osborne and Steven Greenhut, vice president for journalism for the Franklin Center for Government and Public Integrity, in connection with the U-T Editorial Board’s “Fixing California” project.

Q: Bring us up to date on where pension reform stands now in San Jose.

A: Well, the voters approved our Measure B back in June [2012] by nearly 70 percent margin. And we’re in the process of implementing changes based on the voters approved ballot measure. Some of those we’ve implemented. Almost all of them are being litigated. And some of them we’re waiting to implement on because of the litigation.

Q: How about the state Public Employment Relations Board? Has PERB sued?

A: PERB is trying to get in the middle of it with actions that have been filed. The unions filed half a dozen lawsuits and half a dozen PERB claims. So PERB is processing through those claims. They’ve given us notice on three of them that they’re going to move to hearing.

Q: You’re familiar with what PERB is doing in San Diego in response to voter approval of its pension reform?

A: They’re trying to prevent the implementation of what the voters have approved. So we’ll go through that process, too. It’s not unexpected since PERB is very friendly to the union interests.

Q: Is your measure similar to San Diego’s pension reform?

A: No, it’s very different than San Diego’s.

Q: How so?

A: Our measure increases the amount that employees have to pay for their retirement benefits. They have to pay up to an additional 16 percent of pay on top of what they’re already paying toward unfunded liabilities. That’s the basic part of the measure.

Q: And that would bring their contribution up to what?

A: They’re between 8 and 11 percent now, in that ballpark, so add 16 percent on top of that. That’s for pension. They also have a contribution for health care, 8, moving to 10 percent and probably should be higher than that.

We’ve said, based on what we can do legally, we can make them pay more. We’ve always been told you can lay people off, you can cut their pay, and you make them pay more. So we did cut the pay — 10 percent pay cuts everybody took. We did layoffs. And now we’re down to making them pay more. But what we did that’s probably more interesting is we recognize an additional 16 percent is a heavy burden for employees, all of them, and very difficult for some of them. So we’re giving them an option to choose a lower cost set of benefits — still a defined-benefit plan, just at lower accrual rates, lower cost-of-living adjustments and later retirement ages. If they choose that then they don’t have to worry about paying the extra 16 percent.